As it contended with third-party delivery aggregators and lower-than-expected domestic same-store sales growth, Domino’s topped Wall Street’s earnings estimates yet fell short on its top-line results. The quick-service restaurant (QSR) chain reported revenues of $811.6 million and earnings per share of $2.19 for the second quarter compared to analyst estimates of $836.9 million and $2.02 per share. For same-store sales, the QSR reported growth of 3 percent compared to Wall Street estimates of 4.8 percent.
Domino’s CEO Richard Allison said on a call with analysts that he was pleased with the second-quarter performance, but noting “we are a work-in-progress brand,” he said there have been and will always be many areas where the brand can improve. With that context in mind, Allison said that same-store sales performance for the quarter came in toward the lower portion of its outlook for three to five years.
The results came as the company faces headwinds “related to aggressive activity from third-party delivery aggregators.” He also noted that he does not foresee this activity easing in the near term. And he pointed out that the company’s fortressing strategy — through which locations are brought on to existing markets, which is said to allow for faster deliveries — also put pressure on comps.
Allison also said the company will keep investing in technology to assist franchisees as well as operators. He noted that GPS tracking technology would be rolled out by the end of the year. “This will be an innovation step that will bring even further transparency to the experience of tracking an order,” Allison said in the call. At the same time, Allison pointed out that the company announced a pilot program and partnership with American robotics company Nuro during the quarter.
The move comes as the company continues to expand its self-driving delivery exploration, which brings the company closer to the “technology that could truly revolutionize the way we do business.” According to reports that surfaced in June, Domino’s and Nuro were teaming up to use a custom vehicle dubbed R2 later in the year. The fleet from Nuro is said to serve certain customers in Houston who place online orders. Diners can track the vehicle through via company’s app and will receive a PIN code to retrieve their pizzas by unlocking a compartment.
In addition, the company continued its multi-market testing of its DOM voice order taking. The technology is now in more than 40 company-owned stores. (The company rolled out the ordering assistant in 2014 per an announcement in April). Through those and other initiatives, Allison said the company will continue to invest and innovate to stay at the lead of its industry. He also pointed out that the company’s Points for Pies promotion extended into the second quarter.
The Points for Pies program gave consumers a chance to earn rewards points without needing to purchase a pizza from the company. While Allison said it was a formidable sales driver, he was most pleased when it came to progress related to additional objectives. Those included app downloads, awareness and re-engagement connected to the loyalty program.
Allison also covered the company’s net new stores in the call.
Domino’s had 45 store openings and three closures when it came to its unit growth in its U.S. business, which “demonstrated our industry-leading unit economics” per Allison. He also noted that a data-driven approach to territory assessment has made a “meaningful educated conversation around how we can best continue to win the long game.” Those efforts would be through lowering the cost per delivery for franchisees and establishing closer proximity to households, among other benefits.